Corzine caused MF Global failure, House panel says

MF Global chief created an ‘authoritarian’ atmosphere: House report

By

RonaldD. Orol

WASHINGTON (MarketWatch) — Decisions made by the former head of bankrupt MF Global sealed the firm’s fate and led to the investment firm’s collapse and over $1 billion in missing customer funds, according to details released Wednesday from a report and investigation conducted by a House Financial Services Committee panel.

According to the panel’s preliminary report, the firm’s former CEO, Jon Corzine, a former co-chairman of Goldman Sachs
GS, -1.03%
who later became a senator and governor of New Jersey, created an authoritarian atmosphere. In addition, the report said that Corzine insulated the firm’s trading activities from the company’s normal risk management review process.

Reuters

Former MF Global CEO Jon Corzine

The report comes after New York-based MF Global filed for bankruptcy roughly a year ago on Oct., 31, 2011, leading to $1.6 billion in missing customer funds.

Specifically, the report notes that Corzine’s decision to focus much of the firm’s investments in European sovereign debt was a problem because they carried “enormous default and liquidity risks.” It added that he failed to develop a corporate strategy for managing the risks.

The report details were released by the House Financial Services Committee’s subcommittee on investigations, which is headed by Rep. Randy Neugebauer, Republican of Texas. Neugebauer said in a statement that the report is essentially an autopsy of how MF Global collapsed and what can be done to prevent future problems.

The panel said in a statement that its investigation of MF Global involved three hearings, more than 50 witness interviews and the review of more than 243,000 documents.

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